No tax demand can be issued or raised when investigation is still in progress: Telangana HC
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- Last Updated on 16 August, 2021
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Case details: Deem Distributors (P.) Ltd. v. Union of India - [2021] 129 taxmann.com 134 (TELANGANA)
Judiciary and Counsel Details
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- M.S. Ramachandra Rao and T. Vinod Kumar, JJ.
Facts of the Case
The petitioner was a partnership firm and involved in the business of dealing in goods and services relating to Ferrous waste and scrap, re-melting scrap ingots of iron or steel etc. The department issued a letter to the petitioner saying that the petitioner had availed input tax credit on the basis of invoices issued by certain suppliers/firms which were fictitious and were issuing fake invoices with an intent to pass on input tax credit, and the petitioner was requested to reverse the input tax credit of Rs. 1,52,35,820/- availed on such invoices immediately. If it would not be reversed then a show cause would be issued under sub-Section (1) of Section 74 of CGST Act. It filed writ petition against the same.
High Court Held
The Honorable High Court observed that a notice in sub-Section (1) of Section 74 of CGST Act may be issued by the proper officer if he is of the opinion that the input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts, to the person who has wrongly availed or utilized input tax credit. But without determination of liability against the petitioner in any enquiry conducted under the Act, a demand for reversal of input tax credit or payment of tax with interest for penalty can’t be raised. Moreover, no advisory jurisdiction is conferred on the officer of GST department to issue any ‘advises’ of the nature issued to the petitioner to reverse credit. Therefore, it was held that no tax demand can be issued or raised when investigation is still in progress.
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